Insurance

Top actuaries, China’s insurers have jobs for you, 96 of them

China’s non-life insurers and reinsurers are being forced to hire a chief actuary by the end of 2019 in an apparent regulatory ramp up in corporate governance levels across the sector

PUBLISHED : Wednesday, 29 November, 2017, 6:01pm
UPDATED : Wednesday, 29 November, 2017, 11:04pm

All of China’s major non-life insurers and reinsurers are being required to hire a chief actuary by the end of 2019, in an apparent regulatory ramp up in corporate governance, according to an official government notice posted on Wednesday.

China’s existing 84 non-life general insurers, and 12 reinsurers – or insurers of insurers – must have their chief actuary in place by January 1, 2020, said the China Insurance Regulatory Commission (CIRC), the mainland’s top insurance watchdog. All newly established insurers will also be required to have such as post created in time.

China’s life insurers currently operate under senior management mechanisms that generally already have chief actuaries within their top ranks, but other types of insurers were not required by law to have one until now.

Non-life insurers and reinsurers had combined assets worth 2.9 trillion yuan (US$439 billion) by the end of October. While the assets at the nation’s life insurers sat at 13.1 trillion yuan.

Actuaries are essential to the insurance industry as they use statistics and financial theory to analyse the financial cost of risk and uncertainties, during policy development and premium calculation, and that solvency and fiscal budget management and assets-liabilities match.

“The notice reflects the government’s ambition to shore up risk control and corporate governance at non-life insurers and reinsurers by making better use of actuarial capabilities,” said Wesley Cui, general manager of insurance consulting at global consultancy Willis Towers Watson in China.

Having more chief actuaries in place will mean insurers can assure a more regulated expansion in future, one which “is based on better interpretation of statistics, products development and risk-based pricing”, he said.

Cui said the increased competition among non-life companies has become too focused in many cases on price, and there has been the general feeling that risk control and operational strength could have been compromised in some cases as a result.

“How to create value through better risk control and corporate governance will become evermore important over the next three to five years, as the currently sizzling growth of the insurance market starts to slow,” said Cui, adding qualified actuaries are in short supply at present in China.

The executive levels of China’s insurance workforce are generally dominated by those with sales backgrounds while in maturer western markets it is more common to see the top posts taken by those with financial or actuarial backgrounds, he said.

According to recruitment firm Hays, in China a chief actuary – with more than 20 years of experience – could command an average annual base salary of at least 2 million yuan (just over US$300,000).

While less senior levels, or those with 15 years’ experience, could expect to be paid more than 1 million yuan.

How to create value through better risk control and corporate governance will become evermore important over the next three to five years, as the currently sizzling growth of the insurance market starts to slow
Wesley Cui, general manager of insurance consulting at global consultancy Willis Towers Watson

Experts say the top insurance watchdog’s move to have chief actuaries in place right across the industry is an obvious statement of intent to step up scrutiny and steer the industry back to its core essentials: of offering safety nets against uncertainties instead of a means for quick profit.

At the start of the month, the CIRC banned three life insurance firms from issuing new products in the next six months – saying the Bank of Communications Life Insurance, ABC Life Insurance and Greatwall Life Insurance, had violated certain regulatory provisions.

Investigators said they found serious problems in the companies’ product design and management, the commission said, ordering the companies to recall the defective products and rectify the problems.

Also on Wednesday, the CIRC issued some updated figures on the recent industry clean-up of rampant sales of so-called controversial universal life insurance policies, which are short-term wealth management products. All insurers that sell them have been under close scrutiny of how they sell and calculate existing policies.

It also said the comprehensive solvency at 167 insurers across China stood at 253 per cent at the end of September, that is down by 1.7 percentage points from the previous quarter year, but still well above the regulatory requirement of 100 per cent, the CIRC said, noting it considered general risk levels are still under control within the insurance sector.

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